The government’s economic team is set to finalise tomorrow its decisions on a subsidy for heating oil and an increase in the heating allowance, regardless of fuel type. Official announcements are due on Wednesday, 14 October, one day before heating oil goes on sale.
Given the broader uncertainty, prices in the international and domestic diesel markets tomorrow, 13 October, will effectively determine the scale of the measures, both for the subsidy and the increase in the allowance.
On today’s figures, the starting price of heating oil would be around €1.96 per litre, including, however, the 20-cent subsidy already applied to road diesel (the difference between road diesel and heating oil reflects the 13-cent lower excise duty, 24% VAT and typically lower profit margins for companies and petrol stations).
In any event, the economic team will seek to keep the starting price below the €1.75 at which last year’s heating season ended.
Several scenarios are under consideration, each with a different fiscal impact.
The least costly in fiscal terms would put the starting price of heating oil at €1.71 per litre. This would require the subsidy at the pump to rise to 25 cents, with 15 cents potentially coming from the state budget and the other 10 cents from refineries.
The most demanding scenario in fiscal terms would put the starting price at €1.61.
In this case, the subsidy at the pump would need to rise to 35 cents. If refineries maintain their additional 10-cent contribution, the remaining 25 cents would have to be covered by the budget.
The most favourable scenario, with a starting price of €1.41, is less likely to go ahead. Under this option, the budget alone would have to provide an additional subsidy of 45 cents.
The allowance
The government will also announce an across-the-board increase in the heating allowance, alongside its decisions on the subsidy at the pump and the starting price of heating oil. The base-case scenario envisages an increase of 20%, while there are reports it could rise to as much as 30%, if the budget allows.
Under the 20% scenario, the minimum subsidy would rise to €120, from €100 last year, while the maximum would reach €960, up from €800 last year.
The increased subsidy for mountainous areas with a climate factor of 1 to 1.19 (such as Agios Athanasios, Fokida, Panorama, Drama, Florina, Elati, Ioannina, Alonistaina, Arcadia, etc.) would rise to €1,200, from €1,000 last year.
The increased subsidy for mountainous areas with a climate factor of 1.2 or higher (such as Velouchi, Nymfaio, Samarina, Ziria, Nevrokopi, etc.) would rise to €1,440, from €1,200 last year.
It remains to be seen whether the increase in the heating allowance will be a uniform 20% for each type of heating fuel, or whether 20% will be the average increase. In the latter case, the subsidy for heating oil could rise by more, since last year its basic amount was the lowest, at €300. This would mean a smaller increase in the subsidy for, for example, pellets or firewood.
Could advance payments also change?
Changes to the rates of advance payments to heating allowance recipients have not been ruled out. Last season, they stood at 60% for existing recipients and 50% for new recipients.
This year, given that the starting price will be higher even under the best-case scenario for the subsidy at the pump than the €1.13 per litre at which heating oil went on sale last year, the advance payment could rise to 70% for existing recipients and 60% for new ones. Payments are scheduled to be made within the first 20 days of December.
However, as everything remains uncertain and the situation is on shifting sands, announcements on the subsidy at the pump will be updated every 15 days, depending on international developments in fuel markets.
The initial subsidy, which will apply until the end of October, is therefore not permanent, and consumers should be careful about when they order fuel and how much they buy.
Who is eligible?
Since the income and property criteria will not be raised, the recipients of the heating allowance will be the same as last year:
603,685 households, which use heating oil
182,724 households, which use natural gas
311,487 households, which use electricity
23,795 households, which use firewood
Awaiting developments
Beyond Wednesday’s announcements, the European Council summit in Brussels on 15 and 16 October is considered pivotal. Greece will seek greater leeway for fiscal flexibility to address the effects of the energy crisis.
The country will seek to secure up to €700 million in additional fiscal space to expand support measures for households and businesses, on top of the €400 million reserve already included in the budget to cushion the pressure from energy prices.
Athens wants greater flexibility in the fiscal rules, so that the additional VAT revenue flowing into state coffers as prices and consumption rise can be channelled into targeted measures without counting towards net spending limits.
For that, however, a European agreement is needed first. Otherwise, any additional support will have to fit within the already tight fiscal margins, without disrupting the budget’s underlying projections.